Lancet is back in the media limelight with its recent study “Mass privatisation and the post-communist mortality crisis: a cross-national analysis.” The study’s authors, Prof. David Stuckler, Dr. Lawrence Kind, and Prof. Martin McKee, commit the sin of all sins by arguing that “Rapid mass privatization as an economic transition strategy was a crucial determinant of differences in adult mortality trends in post-communist countries; the effect of privatization was reduced if social capital was high.” Namely, that the “shock therapy” of the mid-1990s led to 3 million premature deaths in Eastern Europe and the former Soviet Union. In Russia in particular rapid privatization was a continuing factor to the five year drop in life expectancy between 1991 and 1994, resulting in an estimated 1 million premature deaths.

Defenders of rapid privatization have jumped all over the authors’ findings. In a letter to the Financial Times, Jeffery Sachs, the stanchest apologist for “shock therapy,” called the study a “confused polemic” and that his policies had “no discernible adverse effect in these countries on life expectancy. If anything, its effects were positive.” The study cited one article by Sachs and for some reason he took this as its authors taking him to task personally. Methinks the ideologue doth protest too much.

The Economistblamed everything but shock therapy for any rising mortality rates. They condemned Lenin and Stalin for creating the planned economy (If the Economist really wants “the blame game to start at the beginning” why not begin with Ivan Grozny for establishing serfdom), Brezhnev’s geriatric auto-piloting for failing to start reforms, Gorbachev for “running printing presses red-hot,” the all-time favorites of “poor diet, smoking and, especially, drinking,” and the West’s failure to prepare for the Soviet collapse. Basically everything butprivatization is given a accusatory nod. Apparently admitting that privatization had any adverse effect would be like questioning the existence God himself. In the end, the editorial concludes “correlation is not causation.” Maybe, but correlation certainly doesn’t help.

First, [Sachs] conjectures that rapid mass privatisation “probably played zero role” and that “a rapid transition … had no discernible adverse effect”. We provide robust evidence that rapid privatisation increased unemployment, reduced access to healthcare, formerly provided by state-owned companies, and depleted the state budget for social safety nets.

Second, Prof Sachs seems unaware of the causes of the post-Soviet mortality crisis. He argues that Russia’s devastating mortality surge in the 1990s resulted from diets high in saturated fats and red meat, dating back to the 1960s. While poor diets are a factor in the underlying death rate, they cannot plausibly explain the massive fluctuations that occurred at this time. Instead, there is a wealth of evidence that these additional deaths were substantially due to changes in hazardous drinking.

In retrospect I think “shock therapy” was a disastrous economic policy. It was ideology trumping good economic analysis. The comparison between the successes in China and the failures of Russia tell a clear story of how bad “shock therapy” was.

The defenders [of shock therapy] say things like, “We were worried that if we didn’t engage in rapid change, there could be reversals.” The critics of that view said: “If you proceed in this reckless way it will result in alienation, failure and reversals.”

It was a matter of judgment, of course. We hadn’t gone through these experiments. But there were other historical experiments on which we could base judgments. None were identical. More reversals occurred in the shock therapy countries, whereas the countries that proceeded in a more careful way have typically moved to reinforce a more democratic direction.

This last sentence is worth thinking about. Not only did privatization contributed to increased mortality, the political fallout from this disastrous policy might had led to Russia’s authoritarian backlash. Interesting.